Despite the recent rise in the oil price to between $25 and $30 a barrel, the cautious Chancellor has assumed it will fall to $21. This should mean that for every $1 above $21 that the price averages in the coming year, revenues will be £200m higher.

The Treasury's Economic and Fiscal Strategy report last week showed that, without the spending increases announced on Budget day, the current Budget surplus was expected to be £17bn in 2000-01, compared with £11bn forecast as recently as the November Pre-Budget report.

After public spending rises costing a net £3bn unveiled last week, the surplus was projected at £14 bn. But there is a widespread suspicion that Gordon Brown has been so cautious generally that this may be too gloomy.

Whitehall officials were surprised by City alarm over the projected cut in the current surplus in later years. This is projected to fall after 2002-03, and capital spending plans will mean a return to net government borrowing in the capital markets.

About this article

Gordon's oil secret

This article was published on
the Guardian website
at 19.00 EST on Saturday 25 March 2000.
A version appeared on p1 of the Observer Business, Media & Cash section of the Observer
on Saturday 25 March 2000.
It was last modified at 19.00 EST on Tuesday 11 December 2001.
It was first published at 19.00 EST on Tuesday 11 December 2001.